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Javier J. Pérez

1 July 2002
WORKING PAPER SERIES - No. 156
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Abstract
In this paper, we present a model-based method for identifying fiscal closure rules in stochastic macroeconomic models. The methodology is based on the stability analysis of the model at hand, with an endogenous derivation of a reaction on the part of the fiscal authority to state variables in the model. The rule achieves the dual aim of imposing solvency on the fiscal sector and generating a state-contingent dynamic adjustment in a framework consistent with the properties of the model. Up to now, fiscal rules in leading large-scale macroeconomic forecasting models have been imposed exogenously, and in this sense are not necessarily compatible with the formulation of other sectors of these models. An example of the derivation procedure, including some illustrative results, is provided using a small calibrated macro model.
JEL Code
C5 : Mathematical and Quantitative Methods→Econometric Modeling
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
C62 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→Existence and Stability Conditions of Equilibrium
1 October 2002
WORKING PAPER SERIES - No. 189
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Abstract
This paper presents an optimal fiscal policy response to address the basic trade-off between the automatic stabilisation properties of budgets and the long run fiscal positions. The framework is an overlapping generations model la Weil (1989), extended to account for stochastic endowments and borrowing constrained households. A benign government chooses over the optimal degree of responsiveness of net taxes to individual incomes, an optimal measure of long-run public debt, or both, in order to smooth households' consumption across states of nature. In the presence of a deficit constraint for the government, the results unambiguously point to the desire for lower debt levels than those currently prevailing in order to enable a more effective hedging of personal income uncertainty by means of more active fiscal stabilisers. Citizens in economies exhibiting more pronounced cycles will favour less automatic stabilisation combined with a more aggressive policy of debt reduction.
JEL Code
H31 : Public Economics→Fiscal Policies and Behavior of Economic Agents→Household
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy
21 June 2005
WORKING PAPER SERIES - No. 497
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Abstract
In this paper I evaluate the usefulness of a set of fiscal indicators as early-warning-signal tools for annual General Government Net Lending developments for some EMU countries (Belgium, Germany, Spain, France, Italy, The Netherlands, Ireland, Austria, Finland) and an EMU aggregate. The indicators are mainly based on monthly and quarterly public accounts' figures. I illustrate how the dynamics of the indicators show a remarkable performance when anticipating general government accounts' movements, both in qualitative and in quantitative terms.
JEL Code
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
H6 : Public Economics→National Budget, Deficit, and Debt
23 May 2007
WORKING PAPER SERIES - No. 757
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Abstract
This study examines the business cycle behaviour of public consumption and its main components; the public wage bill (including compensation per employee and public employment) and intermediate consumption in the euro area aggregate, euro area countries and a group of selected non-euro area OECD countries (Denmark, Sweden, the UK, Japan and the US). It looks across a large number of variables and methods, using annual data from 1960 to 2005. It finds robust evidence supporting that public consumption, wages and employment co-move with the business cycle in a pro-cyclical manner with 1-2 year lags, notably for the euro area aggregate and euro area countries. The findings reflect mainly the correlation between cyclical developments (automatic stabilizers), but also point to the important role of pro-cyclical discretionary fiscal policies.
JEL Code
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy
H50 : Public Economics→National Government Expenditures and Related Policies→General
28 December 2007
WORKING PAPER SERIES - No. 843
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Abstract
While fiscal forecasting and monitoring has its roots in the accountability of governments for the use of public funds in democracies, the Stability and Growth Pact has significantly increased interest in budgetary forecasts in Europe, where they play a key role in the EU multilateral budgetary surveillance. In view of the increased prominence and sensitivity of budgetary forecasts, which may lead to them being influenced by strategic and political factors, this paper discusses the main issues and challenges in the field of fiscal forecasting from a practitioner's perspective and places them in the context of the related literature.
JEL Code
H6 : Public Economics→National Budget, Deficit, and Debt
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
14 May 2008
WORKING PAPER SERIES - No. 901
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Abstract
Short-term fiscal indicators based on public accounts data are often used by European policy makers. They represent one of the main sources of publicly available intra-annual fiscal information. Nevertheless, these indicators have received limited attention from the academic literature analysing fiscal forecasting in Europe. Some recent literature suggests the validity of public accounts data to forecast government deficits in the euro area. We extend this literature on two fronts:(i) we shift the focus from indicators of government deficits to look at indicators for government total revenue and total expenditure; (ii) we use a mixed-frequency state-space model to integrate readily available monthly/quarterly cash-based fiscal data with annual general government series (National Accounts). By doing so, we are able to maintain the focus on forecasting and monitoring annual outcomes, while making use of infra-annual fiscal information, available within the current year. The paper makes a case for the use of monthly cash indicators for multi- lateral fiscal surveillance at the European level.
JEL Code
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
H6 : Public Economics→National Budget, Deficit, and Debt
10 September 2008
WORKING PAPER SERIES - No. 937
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Abstract
We use a newly available dataset of euro area quarterly national accounts fiscal data and construct multi-variate, state-space mixed-frequencies models for the government deficit, revenue and expenditure in order to assess its information content and its potential use for fiscal forecasting and monitoring purposes. The models are estimated with annual and quarterly national accounts fiscal data, but also incorporate monthly information taken from the cash accounts of the governments. The results show the usefulness of our approach for real-time fiscal policy surveillance in Europe, given the current policy framework in which the relevant official figures are expressed in annual terms.
JEL Code
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
H6 : Public Economics→National Budget, Deficit, and Debt
13 November 2008
WORKING PAPER SERIES - No. 963
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Abstract
This paper looks at public and private sector wages interactions since the 1960s in the euro area, euro area countries and a number of other OECD countries. The paper reports, first, a strong positive annual contemporaneous correlation of public and private sector wages over the business cycle; this finding is robust across methods and measures of wages and quite general across countries. Second, we show evidence of long-run relationships between public and private sector wages in all countries. Finally, causality analysis suggests that feedback effects between private and public wages occur in a direct manner and, importantly also via prices. While influences from the private sector appear on the whole to be stronger, there are direct and indirect feedback effects from public wage setting in a number of countries as well. We show how country-specific institutional features of labour and product markets contain helpful information to explain the heterogeneity across countries of our results on public/private wage leadership.
JEL Code
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J51 : Labor and Demographic Economics→Labor?Management Relations, Trade Unions, and Collective Bargaining→Trade Unions: Objectives, Structure, and Effects
J52 : Labor and Demographic Economics→Labor?Management Relations, Trade Unions, and Collective Bargaining→Dispute Resolution: Strikes, Arbitration, and Mediation, Collective Bargaining
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy
H50 : Public Economics→National Government Expenditures and Related Policies→General
Network
Wage dynamics network
14 October 2009
WORKING PAPER SERIES - No. 1099
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Abstract
This paper develops a dynamic general equilibrium model in which the public and the private sector interact in the labor market. Previous studies that analyze the labor market effects of public sector employment and wages have mostly assumed exogenous rules for public wage and public employment. We show that theories that equalize wages with marginal products in the private sector can rationalize the interaction of public and private sector wages when extended to accommodate a non-trivial government sector/public sector union that endogenously determines public employment and wages. Our model suggests a positive correlation between public and private sector wages. Any increase in tax revenues, coupled with the existence of a positive public-private sector wage gap, makes working in the public sector an attractive option. Thus, a positive neutral productivity shock increases public and private sector wages. More interestingly, even a private-sector specific productivity shock spills-over to the public sector, increasing public wages. These facts lend some support to the wage leading role of the private sector. Nevertheless, at the same time, a positive shock to public sector wages would lead to an increase in private sector wages, via the flow of workers from the private to the public sector.
JEL Code
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J51 : Labor and Demographic Economics→Labor?Management Relations, Trade Unions, and Collective Bargaining→Trade Unions: Objectives, Structure, and Effects
J52 : Labor and Demographic Economics→Labor?Management Relations, Trade Unions, and Collective Bargaining→Dispute Resolution: Strikes, Arbitration, and Mediation, Collective Bargaining
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy
H50 : Public Economics→National Government Expenditures and Related Policies→General
11 December 2009
WORKING PAPER SERIES - No. 1133
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Abstract
We analyse the impact of fiscal policy shocks in the euro area as a whole, using a newly available quarterly dataset of fiscal variables for the period 1981-2007. To allow for comparability with previous results on euro area countries and the US, we use a standard structural VAR framework, and study the impact of aggregated and disaggregated government spending and net taxes shocks. In addition, to frame euro area results, we apply the same methodology for the same sample period to US data. We also explore the sensitivity of the provided results to the inclusion of variables aiming at measuring “financial stress” (increases in risk) and “fiscal stress” (sustainability concerns). Analysing US and euro area data with a common methodology provides some interesting insights on the interpretation of fiscal policy shocks.
JEL Code
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H30 : Public Economics→Fiscal Policies and Behavior of Economic Agents→General
11 December 2009
WORKING PAPER SERIES - No. 1132
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Abstract
The analysis of the macroeconomic impact of fiscal policies in the euro area has been traditionally limited by the absence of quarterly fiscal data. To overcome this problem, we provide two new databases in this paper. Firstly, we construct a quarterly database of euro area fiscal variables for the period 1980-2008 for a quite disaggregated set of fiscal variables; secondly, we present a real-time fiscal database for a subset of fiscal variables, composed of biannual vintages of data for the euro area period (2000-2009). All models are multivariate, state space mixed- frequencies models estimated with available national accounts fiscal data (mostly annual) and, more importantly, monthly and quarterly information taken from the cash accounts of the governments. We provide not seasonally- and seasonally-adjusted data. Focusing solely on intra-annual fiscal information for interpolation purposes allows us to capture genuine intra-annual "fiscal" dynamics in the data. Thus, we provide fiscal data that avoid some problems likely to appear in studies using fiscal time series interpolated on the basis of general macroeconomic indicators, namely the well-known decoupling of tax collection from the evolution of standard macroeconomic tax bases (revenue windfalls/shortfalls).
JEL Code
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
H6 : Public Economics→National Budget, Deficit, and Debt
21 January 2010
WORKING PAPER SERIES - No. 1148
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Abstract
Do public sector wages exert pressures on private sector wages, or has the private sector a leadership role in wage setting? This paper tries to isolate the pure signalling effect that one sector might exert on the other by controlling for other determinants of wages (prices, productivity, institutions) for the main euro area economies (Germany, France, Italy and Spain) and the periods 1980-2007 and 1991-2007. It exploits available quarterly information not yet used in the literature, and combines different data sources in the framework of mixed-frequencies time series models. The quarterly frequency of our data allows us to check the existence of purely intra-annual links between public and private sector wages (signalling effect). There is strong evidence of public wages’ leadership, either in conjunction with bi-directional links from the private sector (Germany and Spain) or pure public wage leadership (France in the sample 1991-2007, Italy for within-the-year linkages).
JEL Code
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J51 : Labor and Demographic Economics→Labor?Management Relations, Trade Unions, and Collective Bargaining→Trade Unions: Objectives, Structure, and Effects
J52 : Labor and Demographic Economics→Labor?Management Relations, Trade Unions, and Collective Bargaining→Dispute Resolution: Strikes, Arbitration, and Mediation, Collective Bargaining
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy
H50 : Public Economics→National Government Expenditures and Related Policies→General
H6 : Public Economics→National Budget, Deficit, and Debt
21 June 2010
OCCASIONAL PAPER SERIES - No. 112
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Abstract
This paper examines the role of government wages in ensuring macroeconomic stability and competitiveness in the euro area. Recent empirical evidence suggests that government wage expenditure is subject to a pro-cyclical bias in most euro area countries and at the euro area aggregate level. Moreover, the evidence points to a strong positive correlation and co-movement between public and private wages in the short to medium term, both directly and indirectly via the price level, in most euro area countries. In a number of countries this interrelation between public and private wages coincided with strong public wage growth and competitiveness losses. These findings underpin the need for prudent public wage policies supported by strong domestic fiscal frameworks and appropriate wage-setting institutions in order to enhance economic stability and competitiveness in Economic and Monetary Union.
JEL Code
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
Network
Eurosystem Monetary Transmission Network
27 May 2011
WORKING PAPER SERIES - No. 1342
Details
Abstract
Public deficit figures are subject to revisions, as most macroeconomic aggregates are. Nevertheless, in the case of Europe, the latter could be particularly worrisome given the role of fiscal data in the functioning of EU
JEL Code
E01 : Macroeconomics and Monetary Economics→General→Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
H60 : Public Economics→National Budget, Deficit, and Debt→General
13 December 2011
WORKING PAPER SERIES - No. 1406
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Abstract
We investigate the public-private wage differentials in ten euro area countries (Austria, Belgium, France, Germany, Greece, Ireland, Italy, Portugal, Slovenia and Spain). To account for differences in employment characteristics between the two sectors, we focus on micro data taken from EU-SILC. The results point to a conditional pay differential in favour of the public sector that is generally higher for women, at the low tail of the wage distribution, in the Education and the Public administration sectors rather than in the Health sector. Notable differences emerge across countries, with Greece, Ireland, Italy, Portugal and Spain exhibiting higher public sector premia than other countries.
JEL Code
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
J45 : Labor and Demographic Economics→Particular Labor Markets→Public Sector Labor Markets
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
5 August 2015
WORKING PAPER SERIES - No. 1834
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Abstract
Should rational agents take into consideration government policy announcements? A skilled agent (an econometrician) could set up a model to combine the following two pieces of information in order to anticipate the future course of fiscal policy in real-time: (i) the ex-ante path of policy as published/announced by the government; (ii) incoming, observed data on the actual degree of implementation of ongoing plans. We formulate and estimate empirical models for a number of EU countries (Germany, France, Italy, and Spain) to show that government (consumption) targets convey useful information about ex-post policy developments when policy changes significantly (even if past credibility is low) and when there is limited information about the implementation of plans (e.g. at the beginning of a fiscal year). In addition, our models are instrumental to unveil the current course of policy in real-time. Our approach complements a well-established branch of the literature that finds politically-motivated biases in policy targets.
JEL Code
C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
H30 : Public Economics→Fiscal Policies and Behavior of Economic Agents→General
H68 : Public Economics→National Budget, Deficit, and Debt→Forecasts of Budgets, Deficits, and Debt
E61 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Policy Objectives, Policy Designs and Consistency, Policy Coordination
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
20 April 2016
WORKING PAPER SERIES - No. 1890
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Abstract
We empirically analyze the impact of public employment and wages' shocks on private labor market outcomes by studying if policies operate differently in periods of economic slack than in normal times. We use local projection methods and focus on the Spanish and euro area aggregate cases. We find that the degree of economic slack is key to determine: (i) if public employment crowds-out private employment, and (ii) the degree and extent of public wage influence on the private sector. In addition, we find that the specific features of the economy also count. In the case of Spain, when fiscal consolidation is implemented at times of economic distress, the contractionary effects of public employment cuts appear more damaging for the economy than those of public wage cuts, while the opposite happens for the euro area as a whole. These differences are likely to be related to specific features of the labor markets in both cases.
JEL Code
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E65 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Studies of Particular Policy Episodes
H6 : Public Economics→National Budget, Deficit, and Debt
C3 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables
C82 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Methodology for Collecting, Estimating, and Organizing Macroeconomic Data, Data Access
11 August 2016
OCCASIONAL PAPER SERIES - No. 176
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Abstract
This paper examines the overall macroeconomic impact arising from reform in government wages and employment, at times of fiscal consolidation. Reform of these two components of the government wage bill appeared necessary for containing the deterioration of the public finances in several EU countries, as a consequence of the financial crisis. Such reforms entailed in some instances, but not always, the implementation of cost-cutting measures affecting the government wage bill, as part of broader consolidation packages that typically hinged more heavily on other fiscal instruments, like public investment. While such measures have adverse short-term macroeconomic effects, public wage bill restraining policy changes present the idiosyncrasy that they can yield medium- to longer-term benefits due to possible competitiveness and efficiency gains through their impact on labour market dynamics. This paper provides some evidence of such medium- to long-run effects, based on a wealth of micro and macro data in the euro area and the EU. It concludes that appropriately designed government wage bill moderation could indeed produce positive dividends to the economy, which depend on certain country-specific conditions. These gains can be reinforced by relevant fiscal-structural reforms.
JEL Code
H50 : Public Economics→National Government Expenditures and Related Policies→General
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
J45 : Labor and Demographic Economics→Particular Labor Markets→Public Sector Labor Markets